Now the snow heaps more misery on construction

UK construction fell again in January to its lowest level since June last year as the snow piled more misery on the sector.

The Markit/CIPS Construction Purchasing Managers’ Index (PMI) remained at the 48.7 level reached in December.

The reading, below the 50 mark that would indicate no change in output, fell short of economists’ forecasts of an improvement to 49.1.

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Dr Howard Archer, chief UK and European economist at IHS Global insight, said the key question is whether the construction sector will see any significant improvement in its fortunes as 2013 proceeds.

“For now at least, the construction sector continues to face major headwinds, including limited public investment and spending, an extended weak economy, a still struggling housing sector, and problems in getting funding for large-scale projects,” he said.

“The construction sector will be fervently hoping that both the economy and the housing market see some improvement in 2013, even if only limited, and that this stimulates building work.”

A number of firms said the unusually heavy snowfall depressed activity last month.

In addition, weak demand and lack of new projects were cited as the main reasons for lower output.

Housebuilding and civil engineering activity both fell, while commercial construction was little changed.

“January’s survey results are yet another indicator of the severe underlying fragility across the UK construction sector,” said Tim Moore, senior economist at survey compiler Markit.

“Unfavourable weather outside is clearly far down the long list of difficulties afflicting construction companies at present,” he added.

Dr Archer said the construction sector is desperately hoping that the Government will come up with more support and initiatives to lift activity on top of the limited boost to capital spending and infrastructure projects provided in the Autumn Statement.

Weak construction output was the main drag on the economy last year, helping tip the country back into recession.

This is despite the fact the sector accounts for less than seven per cent of Britain’s gross domestic product (GDP).

The survey showed there were some brighter signs for the sector as business optimism rose and a protracted decline in new orders slowed sharply.

“There are some straws of hope to snatch at in the January survey,” said Dr Archer.

“Firstly, the underlying rate of contraction in construction activity was likely to be modestly less in January compared to December given that activity contracted at a similar rate in the two months despite the snow factor in January.

“Secondly, new orders declined at an appreciably reduced rate in January. Thirdly, employment in the sector edged up in January.

“Fourthly, business expectations among construction companies improved to a six-month high in January reflecting hopes of increased Government investment following recent policy announcements,” he added.

Housebuilding activity contracted for an eighth successive month in January, albeit at the slowest rate since October.

Civil engineering activity contracted for the first time in five months.

Commercial activity stabilised in January after six months of contraction.

Despite the gloomy national picture, surveyors in Yorkshire expect a gradual improvement in the building sector this year.

The Royal Institution of Chartered Surveyors’ (RICS) construction market survey said Yorkshire’s construction market is “expected to turn a corner this year”, with chartered surveyors predicting an increase in out- put.

Twenty five per cent more surveyors quizzed in the final three months of 2012 said they expect workloads to increase over the coming 12 months after a tough year for the building sector.

Reported workloads also grew slightly in the fourth quarter, the survey showed.

A net balance of ten per cent more respondents said activity had increased, with the biggest gains seen in private housing and private commercial develop-ment.

However, 91 per cent of surveyors said financial constraints are holding the sector back, with about two thirds citing insufficient demand.

Over two thirds also claimed that the bad weather had hampered a recovery in the sector.